Public sector banks in India have outperformed private sector banks in Q4FY25 profit growth, driven by business expansion, improved asset quality, and lower provisioning, according to CareEdge Ratings. Private banks faced challenges due to losses in some institutions, but overall sector performance remained stable.
Public sector banks in India reported stronger profit growth than private lenders in the fourth quarter of the financial year 2025, according to a recent report by CareEdge Ratings, a leading Indian credit rating agency. The report highlights that government-owned banks have benefited from business expansion, improved asset quality, and controlled operating costs, boosting their profitability during the quarter.
Scheduled Commercial Banks (SCBs) across India collectively recorded a 4.3% year-on-year (YoY) increase in net profit to ₹0.93 lakh crore in Q4FY25. This growth was mainly fueled by a steady rise in loan growth and higher income from non-interest sources. However, the net interest margin (NIM) for SCBs slightly declined by 21 basis points to 2.99%, impacted by rising deposit costs and slower growth in certain loan segments.
Public Sector Banks (PSBs), which are predominantly government-owned, led the performance among SCBs with net profit surging 13.1% YoY to ₹0.51 lakh crore. This growth was supported by a lower profit base from the previous year, improved asset quality, gains from treasury operations, and efficient cost management. The report noted that PSBs’ strong showing underscores their recovering financial health amid sector-wide improvements. Examples of prominent PSBs include State Bank of India and Bank of Baroda.
In contrast, Private Sector Banks (PVBs) saw a 4.7% YoY decline in net profit to ₹0.42 lakh crore in the same quarter. This dip was primarily due to challenges faced by one major private bank related to accounting mismatches, troubles in its microfinance portfolio, and increased provisioning requirements. Excluding this outlier, the private banking segment would have recorded a 5.4% profit growth, reaching ₹0.46 lakh crore. Leading private banks include HDFC Bank and ICICI Bank.
Additionally, asset quality across the banking sector improved, with the Net Non-Performing Asset (NNPA) ratio for SCBs falling to an all-time low of 0.5%, compared to 0.6% a year earlier, reflecting better loan recoveries and risk management.
The CareEdge report concludes that while public sector banks have emerged stronger and more profitable in Q4FY25, private banks continue to face isolated pressures but maintain relatively healthy growth overall.
